Pension savers look set to be the big winners in tomorrow's Spring Budget, with Jeremy Hunt expected to raise the lifetime allowance for pension savings to a record level.
In an effort to encourage people to keep working, the chancellor will boost the allowance on tax-free pension savings on Wednesday from £1.07 million to £1.8 million, taking it to the joint highest level on record.
Nearly two million people will benefit from the move as Hunt seeks to address concerns that allowances are driving doctors and other professionals into retirement.
The Times estimates that increasing the allowance means that people could avoid paying as much as £180,000 in tax on their pension pots when they draw money. The lifetime allowance represents the amount people can build up in their pension pot before incurring punitive charges.
People face a 25% levy on any additional income from their pension pot. This rises to 55% if they choose to draw it as a lump sum.
The government will also raise the annual allowance — the amount people can save each year before incurring tax — from £40,000 to £60,000. The combined cost of the increased allowances is expected to be £2billion a year.
What else does Hunt have up his sleeve?
While Mr Hunt’s room for manoeuvre is reported to be relatively constrained, he will also use his budget to freeze fuel duty and retain the 5p cut in petrol and diesel for another year at an estimated cost of £6billion.
The Treasury will extend the energy price guarantee, which limits energy bills for a typical household to £2,500, for another year.
He is also expected to ignore his backbenchers and to push ahead with increasing corporation tax from 19% to 25% in April, according to The Times.
Will there be changes to the windfall tax?
The chancellor has also faced pressure to amend the windfall tax amid growing evidence that it is driving investment away from the North Sea.
Aberdeen & Grampian Chamber of Commerce, the British Chambers of Commerce and Offshore Energies UK have all called for a price floor to to be applied to the levy.
The UK Government's enormous tax grab on the energy industry was widely criticised when it was confirmed at the end of last year.
The chancellor hiked the EPL on North Sea oil and gas producers by another 10% to 35% - bringing the overall tax rate to an eye-watering 75%. He also extended the lifespan of the EPL until March 2028 from the previous date at the end of 2025.
Click here to read the Chamber's Budget 'asks' in full.